US Stocks Continue Slumping, Led By Tech, Fincls; DJIA Off 62

DonnaKardos

NEW YORK (MarketWatch) -- U.S. stocks remained lower midday Tuesday, despite U.S. factory goods orders coming in better than expected, as investors are concerned about the Federal Reserve's two-day policy meeting.

The declines came even as transportation stocks surged on Warren Buffett's deal to acquire Burlington Northern. Buffett characterized the deal as a bet on the economic future of the U.S., a bullish statement at a time when investors have gotten increasingly concerned about economic fundamentals.

The Dow Jones Industrial Average was recently down 62 points, or 0.6%, at 9726. Earlier in the session, the measure traded as low as 9703. Intel led the Dow's declines, dropping 3.1% after Morgan Stanley cut its rating on the semiconductor industry, warning that fundamentals are peaking. Financial components American Express and Bank of America also weighed, sliding nearly 2% each after Swiss banking giant UBS swung to third-quarter loss and cautioned that heavy withdrawals from wealthy clients will persist. UBS, which is not a Dow component, dropped 5.5%.

The tech-heavy Nasdaq Composite dropped 0.6% recently. The S&P 500 was down 0.5%, with both its financials and technology sectors sliding more than 1%.

Tuesday's slump comes as investors are concerned about what indications may come out of the Federal Open Market Committee's two-day meeting, which begins Tuesday. With stocks seeming to take their cues from the dollar even more recently than in the past, there is heightened focus on the Fed's statement. The Fed is widely expected to keep its key rate target near zero, but may begin opening the door to possible rate tightening.

Strategist Dan Greenhaus of Miller Tabak in New York expects an actual rate hike won't happen until mid-2010 at the earliest. "They can't really move until there's some real pickup in employment," Greenhaus said. "We're just not at that point yet where we're seeing that kind of organic strength in the economy."

The meeting comes as investors have grown increasingly skeptical of whether the economy has improved enough to justify the Dow's 50% jump from its 12-year closing low March 9.

"We're waiting for the market to stabilize a little bit," said Burt White, chief investment officer at LPL Financial. "Even though we got some good data, including the factory goods orders and Buffett's deal, the market is waiting for a few upticks before active managers begin to redeploy the cash they raised and the profits they took at the last part of October."

The transportation sector, however, was riding high Tuesday on excitement over Buffett's Berkshire Hathaway buying the equity stake it doesn't already own in Burlington Northern. The deal values the railroad operator at $34 billion, plus $10 billion in debt. "It's an all-in wager on the economic future of the United States," Buffett said in a statement.

The Dow Jones Transportation Average surged 4.4% recently as Burlington Northern climbed 28% on the deal, and several of its rivals also climbed. CSX rose 6.3%, while Union Pacific gained 6.7%.

In other markets, the dollar was higher against the euro but weaker against the yen in recent trading. Oil futures fell, while gold futures rose. Treasurys were mixed, with the two-year note up 1/32 to yield 0.917%, and the 10-year note 9/32 lower, yielding 3.458%.

Tuesday's U.S. factory goods data showed orders rose 0.9% in September, the fifth increase in six months and better than the 0.8% rise Wall Street had expected. In addition, durable goods climbed more than first thought, up 1.4%.

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